Your health care costs may drop significantly when you turn 65 and can finally enroll in Medicare. But the sign-up rules can be tricky, and it’s easy to make mistakes that could leave you with coverage gaps, lifetime penalties or extra costs. Here’s how to avoid six common mistakes when signing up for Medicare.
— Not knowing you need to take steps to sign up at 65.
— Assuming you have to sign up for Medicare at 65 even if you’re still working.
— Not signing up for Medicare at 65 if you’re on COBRA or have retiree health coverage.
— Missing the deadlines for filling in the gaps in Medicare.
— Not shopping around carefully for a Medigap policy when you first enroll.
— Not contesting the high-income surcharge when you retire.
Not Knowing You Need to Take Steps to Sign Up at 65
If you already signed up for early Social Security benefits, then you’re automatically enrolled in Medicare at 65. But if you wait until full retirement age to sign up for Social Security — which is now from age 66 to 67 depending on the year you were born — then you need to take steps to enroll in Medicare yourself. “If you’re not getting Social Security benefits, you won’t be automatically enrolled,” says Joanne Giardini-Russell, owner of Giardini Medicare in Howell, Michigan.
You can sign up for Medicare online at the Social Security website, even if you aren’t signing up for Social Security benefits yet. See Social Security’s Apply Online for Medicare — Even If You Are Not Ready to Retire for more information.
You have a seven-month initial enrollment period to sign up for Medicare, which runs from three months before to three months after the month you turn 65. Coverage begins on the first of the month you turn 65 if you sign up before your birthday month, and Part A has up to six months of retroactive coverage (but no earlier than your birthday month) if you sign up later. But if you wait until your birthday month or the three months after that, your Part B coverage won’t start until the next month or later, depending on when you sign up. “People don’t realize that you get that delayed start,” says Giardini-Russell. For example, if your 65 th birthday is in September but you wait until October to enroll, your Part A coverage will begin on Sept. 1 but Part B coverage wouldn’t start until Dec. 1, she says. See Medicare.gov’s When Will My Coverage Start? for details.
If you miss the seven-month enrollment period and you don’t have other insurance from an employer (or spouse’s employer), then you usually need to wait until Jan. 1 to March 31 to sign up for Medicare, with coverage beginning July 1. You may also have to pay a late-enrollment penalty of 10% of the cost of Part B for every 12 months you should have been enrolled in Medicare but were not.
Assuming You Have to Sign Up for Medicare at 65 Even if You’re Still Working
Even though you can sign up for Medicare at 65, you may not have to enroll yet if you’re still working (or your spouse is working) and you have employer health insurance coverage. But you must sign up within eight months of leaving your job or losing your employer coverage, whichever is first, to avoid a late-enrollment penalty, says Casey Schwarz, senior counsel of education and federal policy for the Medicare Rights Center.
Most people sign up for Medicare Part A (which covers hospitalization) at age 65 even if they’re still working because it’s usually free. But Medicare Part B (which covers doctors and outpatient services) has a monthly premium. The standard Part B premium is $144.60 per month, but if your adjusted gross income is greater than $87,000 if single or $174,000 if married filing jointly, then you have to pay a high-income surcharge that boosts your monthly premiums to $202.40 up to $491.60 depending on your income (see Part B costs for details).
If you’re happy with your current insurance, you may be able to delay signing up for Medicare Part B if you (or your spouse) have coverage from an employer with 20 or more employees. You may even want to delay signing up for Part A if you want to contribute to a health savings account — you can contribute to an HSA after age 65 as long as you haven’t signed up for Medicare yet. (However, you generally have to sign up for Medicare at 65 if you’re working for a smaller employer because Medicare usually becomes primary coverage at 65 and your employer’s coverage is secondary if your employer has fewer than 20 employees.)
But if you delay signing up for Medicare while you’re still working, you need to be careful about the deadlines when you do leave your job. If you don’t sign up with eight months of leaving your job or losing your employer’s insurance, you may be subject to the late-enrollment penalty. When you do sign up, your employer usually needs to fill in a form showing that you’ve been continuously covered by employer-based coverage since you turned 65 without a gap of more than eight months, says Schwarz. Even though you have that eight-month sign-up window, she recommends enrolling in Medicare before you leave your job so you don’t end up without coverage for a few months. “If you apply before the employment or insurance ends, you can elect a particular effective date or create a small planned overlap,” she says.
Not Signing Up for Medicare at 65 if You’re on COBRA or Have Retiree Health Coverage
You can delay signing up for Medicare at 65 if you (or your spouse) are still working and have coverage through a current employer with 20 or more employees. But if you lose your job and sign up for COBRA rather than Medicare, you could face expensive coverage gaps.
That’s because if you don’t have health insurance from a current employer with 20 or more employees, Medicare generally becomes your primary coverage at age 65 and other coverage, including COBRA, becomes secondary. Retiree coverage and health insurance from an employer with fewer than 20 employees generally become secondary, too. “Mostly the mistakes we see are from people who assume that they do not need to enroll — either people who work for smaller employers, people who have retiree or individual policies and are separately working, or people whose severance includes continued health insurance coverage and they assume that they will be able to sign up for Medicare when that ends,” says Schwarz.
Bonnie Burns, a consultant with California Health Advocates, has worked with people who signed up for COBRA rather than Medicare when losing their jobs after age 65 and received big bills because the insurer said Medicare should have been their primary coverage, even though they hadn’t signed up for it. She helped a woman appeal one such bill by explaining that the employer did not adequately notify her of the Medicare rules when she left her job.
Burns recommends signing up for Medicare promptly after you lose your job if you’re 65 or older, even though you have the eight-month window for avoiding the late-enrollment penalty. Your State Health Insurance Assistance Program, or SHIP, can help with Medicare enrollment questions. You can find your local SHIP at www.shiptacenter.org.
Missing the Deadlines for Filling in the Gaps in Medicare
Medicare can cover the bulk of your health care costs, but it leaves some gaps — you’ll have to pay deductibles and copayments, and Medicare doesn’t cover prescription drugs. But you can get a Medicare supplement (Medigap) plan to cover many of the deductibles and copayments, and some Medigap plans cover other costs that aren’t included in Medicare, such as foreign travel. Medigap doesn’t cover prescription drugs, but you can also get a Medicare Part D prescription-drug plan from a private insurer to help with those costs. Or you can get both health care and drug coverage from a private Medicare Advantage plan, rather than signing up for Medigap and a Part D plan.
But all of these plans have sign-up deadlines, too — and they’re all different.
If you sign up for a Medigap plan within six months of signing up for Medicare Part B, insurers can’t reject you or charge more regardless of your health. But if you wait past that six months or want to switch plans later, you may have a difficult time finding coverage if you have any medical issues.
You don’t have to sign up for Part D if you have other prescription-drug coverage that is considered to be at least as good as Medicare’s — whether through a current employer or retiree coverage. But you must sign up for Part D within 63 days of losing that “creditable coverage” or else you’ll have to pay a late-enrollment penalty of 1% of the national average Part D plan premium for every month you don’t have Part D in place. “It adds up and it stays with a person for life,” says Giardini-Russell. You can switch Part D plans during open enrollment each year, which runs from Oct. 15 to Dec. 7 for new coverage to start Jan. 1.
If you want Medicare Advantage coverage, you generally have the same enrollment window as you have for Medicare — you can sign up within three months before to three months after the month you turn 65. If you’re working past 65, you have up to two months after the month your employer’s coverage ends to sign up for Medicare Advantage. Like Part D, you can switch Medicare Advantage plans during open enrollment each year. There are also some situations where you can switch Medicare Advantage plans at other times, such as if you move out of the plan’s service area — see Medicare.gov’s Special Enrollment Periods and Understanding Medicare Advantage and Prescription Drug Plan Enrollment Periods for more information.
Not Shopping Around Carefully for a Medigap Policy When You First Enroll
Since you usually have just six months after enrolling in Medicare Part B to get a Medigap policy without any health questions, it’s important to shop around carefully at that point. Each Medigap plan with the same letter designation has the same coverage, but the premiums can vary significantly from insurer to insurer. “The typical person with Medicare has access to more than 100 different Medigap plan configurations, and sometimes much more,” says Andrew Shea, senior vice president of eHealthMedicare.com. “Most parts of the country have standardized plan benefits, meaning Medigap Plan F from one company has the exact same benefits as Medigap Plan F from another company. The only differences are the company name and the amount of money you pay for your coverage.”
Choose the letter designation with the coverage you want — see How to Compare Medigap Policies at Medicare.gov for details — and then compare costs from several insurers. In the past, Plan F had been the most popular plan but that is not available to new Medicare enrollees after Jan. 1, 2020. Plan G provides similar coverage and is still open to new Medicare enrollees.
An eHealthMedicare survey of Medicare supplement Plan G costs found that Medicare beneficiaries could save an average of $537.60 per year by comparing all of their Plan G choices and enrolling in the lowest-cost option.
You may be able to switch Medigap plans regardless of your health in some states, and some insurers may let you switch to a less-comprehensive plan without new health questions. Find out about your state’s rules from your state insurance department — see the National Association of Insurance Commissioners’ map for links.
Not Contesting the High-Income Surcharge When You Retire
Most people pay $144.60 per month for Medicare Part B in 2020, but if your modified adjusted gross income is more than $87,000 if single, or more than $174,000 if married filing jointly, then you may have to pay a high-income surcharge, which boosts your monthly premiums to $202.40 up to $491.60, depending on your income.
The surcharge is based on your last tax return on file — so your 2020 premiums are based on your 2018 income. If your income has dropped since then because of certain life-changing events — such as marriage, divorce, death of your spouse, job loss or retirement — then you may be able to get the surcharge reduced or eliminated based on your more-recent income.
To request the change, wait until you get the notice of your Medicare Income-Related Monthly Adjustment Amount, or IRMAA, then file Form SSA-44 with the date of the life-changing event and a copy of your more-recent tax return (or an estimate of your annual income). You also need to provide evidence of the life-changing event, such as a letter from your employer stating that you retired.
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Avoid These Mistakes When Signing Up for Medicare originally appeared on usnews.com